Government boost for major regeneration projects

Deputy prime minister Nick Clegg has announced that the government will roll out a US-style fund-raising mechanism designed to kickstarting major regeneration schemes nationwide.

The new funding mechanism, initially piloted by the last Labour government, will permit councils to borrow money against anticipated tax receipts generated by new construction projects - including new home schemes. They can use that borrowing to fund key infrastructure and other capital projects, which will support locally driven economic development.

Speaking at the Liberal Democrat party conference in Liverpool yesterday, Clegg said that local authorities will be given the freedom to borrow against "extra business rates to help pay for additional new developments".

He added: "This may not make the pulses race in the country at large. But I assure you it is the first step to breathing life back into our greatest cities."

Various high profile developments have all put in bids to use the funding method, including the £1.2bn Ravenscraig regeneration scheme in North Lanarkshire and the £450m Buchanan Quarter scheme in Glasgow.

Clegg continued: "Whether in Newcastle, in Sheffield, in Leeds or indeed in every city in the UK, what matters most is that finally, they will be in the driving seat, instead of waiting for a handout from Whitehall."

The new funding mechanism has been welcomed by the propery sector.

British Property Federation chief executive Liz Peace said: "We are delighted that government has taken such a far-sighted step to ensure that new infrastructure - which will be vital to rebuild the UK economy - can be delivered, even at a time when public funding is scarce.

"Ministers should be congratulated for offering industry what would appear to be absolutely brilliant news, although obviously the devil will be in the detail.

"A huge amount of work and expertise has gone into lobbying for TIFs, over a campaign lasting many years. We look forward to working with government to ensure that the emerging TIF regime is workable and effective."

Although largely welcomed by members of the property industry, some property professionals believe that the government could do more to help support major new building projects.

John Beresford, development director at Grainger plc, said: "While we very much welcome tax increment financing [TIFs] as a new vehicle to stimulate regeneration and investment, we urge the coalition to focus the same effort on fixing the planning system, which is currently in a chaotic state. Without a working planning system, TIFs will have a very difficult time supporting economic growth."